Yahoo Finance Einhorn’s Greenlight Underperformed ‘Broken’ Stock Market Last Quarter
(Bloomberg) -- David Einhorn’s Greenlight Capital underperformed the “fundamentally broken” stock market at the start of the year, according to a letter to investors.
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The fund returned 4.9% in the first quarter, net of fees and expenses, compared to a nearly 11% return for the S&P 500 Total Return Index. Even though the first three months of 2024 “seemed like a bull market,” Greenlight said in the letter on Wednesday, “looking at the performance of our long and short portfolios, it is difficult to see where the market was up double digits.”
The company added that it is clear now that there was “negative alpha in our long book and positive alpha in our short book.”
Greenlight said the market has changed with most investors overlooking valuation, either because of passive money managers, retail traders without formal training or other strategies that choose not to care about valuation.
Read more: Einhorn Says Markets ‘Fundamentally Broken’ by Passive Investors
“From our perspective, the result of this historic shifting of capital is a beautiful opportunity set in which we can invest,” the letter said.
The results were still better than the prior quarter. In the final three months of 2023, the fund lost 4.3%, net of fees and expenses, compared to a roughly 12% return for the S&P 500 index that includes dividend gains. For the full year, the fund was up about 22%, versus a 26% return for the US benchmark.
During the first quarter, Greenlight established new long equity positions in a number of companies including a “medium-sized” holding in casino operator Penn Entertainment Inc. In an artificial intelligence play, the fund also established a new long position in HP Inc. The fund also added small long positions in biotechnology firm Roivant Sciences Ltd. and Liberty Global Ltd. And Greenlight disclosed that it established a “medium-sized” macro position to benefit from higher copper prices.
The firm also closed several positions during the quarter, including long ones in New York Community Bancorp. and First Horizon Corp.
NYCB “announced disastrous results in January. Fortunately, we decided to sell immediately and ask questions later,” the firm wrote. “As a result, we escaped with an immaterial loss.”
Earlier this month, Einhorn said at a conference in New York that the company was betting on Solvay SA. The Belgian chemicals company is among Greenlight Capital’s largest disclosed long positions, according to the letter.
At the end of the quarter, the fund had an average exposure of 108% long and 63% short, the letter said.
(Updates with fund’s full year performance for 2023.)
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